Finnish tax on UK ISA

[Jonathon]

Hi,

I moved with my Finnish wife and kids to Finland two years ago from the UK. I was able to keep my UK job, but work remotely so I'm a UK resident for tax purposes, even if I spend most of my time in Finland.

I received a letter from Vero yesterday about a tax free savings account (ISA) I have in the UK, asking me to prove I've paid tax on the interest or else pay Finnish capital gains- well, the point of the account is that it is tax free, so I haven't paid any tax. I had just figured, since I'm a UK taxpayer and not entitled to Finnish benefits, this wouldn't be an issue.

I wonder if anyone else has had this happen? I reckon I'll have to stump up... It's no small amount, but at the same time not enough to pay for a tax lawyer.

[riku2]

the point of the account is that it is tax free

it's tax free if you are a UK taxpayer, the "tax free" part comes from the tax laws of those paying tax, not the account itself. If somebody tax resident in Finland buys a UK ISA then they would pay tax on it (since that kind of account isn't tax free under finnish tax laws).

I'm a UK resident for tax purposes, even if I spend most of my time in Finland

I thought if somebody lives more than half the year in a country then they are considered tax resident in that country. The tax status is determined by where you live (for the majority of the time) and not where your job is/you get paid from. I don't see how "work remotely" comes into the picture. Surely there would be a thriving industry of people working from home in finland "remotely" for companies based in places like Monaco and the Isle of Man and considering themselves tax resident of those countries even though they spend most of their time in Finland?

[betelgeuse]

I moved with my Finnish wife and kids to Finland two years ago from the UK. I was able to keep my UK job, but work remotely so I'm a UK resident for tax purposes, even if I spend most of my time in Finland.

Finnish social security is based on residence. You are eligible for Kela. This is also in line with the work based rules of EU:

"As a basic rule, you are subject to the legislation of the country where you actually work as an employed or a self-employed person. It doesn't matter where you live or where your employer is based."

http://ec.europa.eu/social/main.jsp?catId=851&

I received a letter from Vero yesterday about a tax free savings account (ISA) I have in the UK, asking me to prove I've paid tax on the interest or else pay Finnish capital gains- well, the point of the account is that it is tax free, so I haven't paid any tax. I had just figured, since I'm a UK taxpayer and not entitled to Finnish benefits, this wouldn't be an issue.

You are a Finnish tax resident. Vero would not send you that letter if it didn't consider you one.

https://www.gov.uk/government/uploads/s ... 769-cv.pdf

If both UK and Finland laws consider you tax resident, the first tie breaker rule if a permanent home. By your post this is in Finland.

"he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);"

You should claim back taxes paid to UK and pay them to Finland (if needed get expert help).

I am not familiar with the taxation of ISA accounts when Finnish tax resident.

[Jonathon]

Thanks very much for these detailed replies. I did call and email the tax office and In To Finland when I first moved, and was told i was a UK tax resident and ineligible to register with Kela - I've still got the emails in case I need them. I just assumed there was something in the EU that simplified cross-border working (I think quite a few Belgians work in France, for example, I just figured my commute was a bit longer).

But, it looks like I'll need to have a good chat with Vero. Not trying to avoid any fiscal responsibilities here.

[Rosamunda]

Hmmm... If they tax your ISA then I imagine your "earned" income would be taxable here too. I don't understand why you were told that you would be a UK taxpayer while living in Finland. Most odd unless your circumstances have changed. Are you PAYE or Schedule D in the UK?

[betelgeuse]

Thanks very much for these detailed replies. I did call and email the tax office and In To Finland when I first moved, and was told i was a UK tax resident and ineligible to register with Kela - I've still got the
emails in case I need them.

Would need to see the emails to comment on them.

I just assumed there was something in the EU that simplified cross-border working (I think quite a few Belgians work in France, for example, I just figured my commute was a bit longer).

There is for social security (see link I already posted). EU does not have rules for taxation. Taxation is based on bilateral treaties. Commuting means you physically travel to the UK to work. In your original post you say you work remotely so you are not commuting.

[Querfeldein]

As I also hold UK ISAs, I'm interested in this question. From the UK side, the answer is clear: if you move abroad, you can no longer pay in, but you can keep an existing ISA and continue to get tax relief:

https://www.gov.uk/individual-savings-a ... oad-or-die

From the Finnish side, I'd really like to see something definitive. I had assumed that double taxation agreements would mean that ISAs would not be taxed, but for now, I interpret the information on vero.fi to mean that Finland will determine the tax rate, irrespective of double-taxation agreements and hence indeed tax the interests on ISAs.

However, I presume I would only need to pay taxes on actual interest, not if my ISAs or other savings held in foreign currencies gain in value in €, simply because of a change in exchange rates?
Also, it would be good to know whether any fixed-term bonds or ISAs that were acquired before moving to Finland would be taxed by Finland on a pro-rata basis or simply on maturity?

[riku2]

the answer is clear: if you move abroad, you can no longer pay in, but you can keep an existing ISA and continue to get tax relief

But if you read it carefully it says this >>you’ll still get UK tax relief on money and investments held in it.<<

Notice that you get UK tax relief. Not tax relief anywhere you happen to live. If you live abroad and are tax resident abroad then i'm not sure what use UK tax relief is.

[Rosamunda]

If I were you I'd book a time to chat with someone at the Tax office. Take the paperwork with you.
Find your local tax office:
http://www.vero.fi/fi-FI/Tietoa_Verohal ... iloasiakas

Helsinki region:
Pääkaupunkiseudun verotoimisto
Postiosoite: PL 400, 00052 Vero
Käyntiosoite: Rajatorpantie 8 A, Vantaa (Myyrmäki)
Puhelinvaihde: 020 612 000
Faksi: 020 612 2660

avoinna ma–pe klo 9–16.15
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asiakirjojen vastaanotto klo 8–16.15
puhelinpalvelu klo 9–16.15
Aukioloaikojen ulkopuolella asiakirjat voi jättää verotoimiston postilaatikkoon.

https://www.vero.fi/en-US/Tax_Administr ... nformation

[goo]

I moved from the UK to Finland and pay now tax in Finland. Since your tax status is different, I do not know how much of the following applies to you. Anyway, you will at most pay the tax explained below.

I had to pay full capital gains tax in Finland on my Stock and Shares ISA when I cashed it in, even though I did not transfer the cash to Finland. Before selling the ISA or changing funds within the ISA, there is no capital gains and thus no tax to pay. (The account nevertheless should be declared to the Finnish tax authorities. As long as there is no tax to pay, there does not seem to be any penalty for not declaring, but once one sells or changes funds, failing to declare becomes tax evasion and is punishable.) The nasty trap was that I had to pay tax on the capital gains accumulated even before moving to Finland. It would have been better for me to sell the ISA or change funds before moving to Finland. That way, I would only had paid tax on the capital gains after moving. Thus, if you have a Stocks and Shares ISA, declare it but avoid selling or changing funds while in Finland, so that there is zero tax to pay.

For a Cash ISA, I believe the interest is taxable as capital gains in Finland. That is, one would have to pay tax on it annually. The good part compared to stocks is that Finland would only tax the interest received after moving to Finland. If this is your situation, you may have to pay 30% tax on the annual interest to Finland.